Time to go electric: Toyota faces shareholder revolt and calls for board shakeup

Toyota is facing a revolt from shareholders at its annual general meeting this week from investors demanding that it go electric, and that the company make board changes and disclose its lobbying against progressive climate policies.

Among those in the firing line is former CEO Akio Toyoda, who shareholders are trying to vote off the board because of his failure to transition the world’s largest automaker to electric vehicles.

The world’s largest automaker has been a global laggard on EVs. Last year just 0.2 per cent of Toyota’s total production were fully electric vehicles and the company has been accused of lobbying governments around the world to water down pro-EV policies.

Toyota’s half-hearted BZ4X was essentially a retrofitted ICE vehicle body with a battery and electric motor was a complete flop. In April Toyota updated its strategy and plans to introduce 10 new EV models

“We will expand our current line up by releasing ten new models by 2026, which would amount to 1.5 million vehicles of annual sales.” said Toyota executive vice president Hiroki Nakajima during the new management policy and direction announcement.

While the announcement was welcome, many believe that Toyota will struggle to grow EV production that quickly over the next 3 years. It took Tesla 9 years to grow EV production from 20,000 units to 1.3 million which, according to Musk is the fastest automotive production growth in history.

Two weeks ago the International Council on Clean Transportation (ICCT) put Toyota in the “Laggards” group of its report ranking the world’s top 20 car makers on EV market dominance, technology and strategic vision.

Last month a group of three asset managers, who collectively hold $400 million of Toyota stock submitted a shareholder proposal urging Toyota Motor Corp to improve disclosure of its lobbying on climate change.

The shareholder group includes Danish pension fund AkademikerPension, Norway’s Storebrand Asset Management and Dutch pension investment company APG Asset Management.

The group wants Toyota to disclose in detail its lobbying efforts, including through industry associations (like Australia’s FCAI), and want it to align its goals with that of the Paris Agreement.

“We’re concerned that Toyota is missing out on profits from soaring EV sales, jeopardising its valuable brand and cementing its global laggard status,” said Anders Schelde, AkademikerPension’s chief investment officer at the time.

“We need concrete policy changes and a better annual review drawing on independent data to calm international investors.

Last month Toyota’s board recommended shareholders vote against the resolution, which will be put to vote tomorrow, saying the company already reports on its climate-related public-relations activities.

According to Wall Street Journal, Toyota representatives have flown several times to meet with management at AkademikerPension in Denmark in the lead up to tomorrow’s general meeting meeting.

People involved in the meetings told WSJ that the Toyota reps tried to nudge the fund to pursue dialogue instead of the shareholder proposal.

Greenpeace calls on Toyota shareholders to vote for the proposal

Greenpeace is also calling on shareholders to vote for the climate transparency proposal and have written an investor briefing outlining why it’s so important.

“We believe that Toyota’s current strategy poses substantial risk to investors over the long term as it fails to adequately account for changes in the global market, and more significantly is not in line with the Paris Agreement to keep global warming below 1.5C,” said Greenpeace in the AGM investor briefing.

“There is a significant chance of stranded assets in the Chinese market as domestic competitors specialising in EVs, like BYD, are set to take larger market shares away from foreign manufacturers.

“Additionally in the European market and American markets, competitors like VW, GM, and Ford, are better positioned to capitalise on regulatory and market conditions, minimising their exposure to transition and climate risks.”

Greenpeace says there’s an increased understanding of the ties between climate risk and financial risk.

In 2020, former Bank of England governor and UN climate envoy Mark Carney argued that climate-related risks must be considered and disclosed as part of the risk profile for any given company.

“The impact of physical risks posed by climate change in turn have a major effect on 5 asset valuations, and in some cases can lead to significant stranded assets.” says Greenpeace.

In the AGM investor briefing, Greenpeace highlight’s recent research from Fitch Ratings, which ranked 15 major automakers on their EV transition risk looking ZEV transition readiness and market exposure. According to Fitch Ratings Toyota scored in the “Higher” risk category.

“It’s clear that Toyota shareholders share our concerns that the car manufacturer is blocking progress on electric vehicles through its determined fossil fuel lobbying,” Greenpeace Australia Pacific campaigner Joe Rafalowicz said.

“As transport remains a leading source of climate pollution, the choices major car manufacturers make today are vital to preventing runaway global warming.

“Yet in the face of all environmental and business sense, Toyota continues to advocate for petrol-powered vehicles, including hybrids, at the expense of electric alternatives.”

Some shareholders intend to vote former CEO off the board

According to the Wall Street Journal, major shareholders including the New York City comptroller’s office, the California Public Employees’ Retirement System and a handful of European asset managers say they have voted or plan to vote to oust several Toyota directors from their board seats including former CEO and grandson of Toyota founder, Akio Toyoda.

WSJ says their vote is a protest against Toyoda’s policy of not setting a date for the company to go 100% electric.

“Toyota is failing to lean, like its peers, into a timely transition to an electric fleet,” Brad Lander from the New York City comptroller told WSJ.

“We want to be persuaded that there is a transition under way and that they’ll take meaningful steps toward an all-EV commitment.”